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27/12/10 - Deduction of VAT by companies not established in the European Union

Administrative Court of Appeal of Versailles,8 December 8, 2009, n°07-2617, Carrier 1 International Gmbh

In that case recently published in October 2010, the Administrative Court of Appeal of Versailles ruled that a company who was not a resident of the European Union cannot deduct the VAT charged on its purchases of goods and services for the needs of its taxable activity in France if, when it acquires these goods and services, it did not announce its existence to the Administration and did not appoint a tax representative.

This decision does not seem consistent with ECJ caselaw, which generally takes into consideration the intention to commence an economic activity (ECJ, February 29, 1996, C-110/94, Inzo). Recently, the ECJ has recently ruled that a taxable person who identifies itself as a taxable person for VAT purposes within a reasonable period following the completion of transactions giving rise to right of deduction cannot be denied the possibility of exercising that right because it was not identified as a taxable person for VAT purposes before using those goods in his taxable activity (ECJ, 21 October 2010, C-385/09, Nidera Handelscompagnie BV).

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